2301 JEROME AVENUE REALTY CORP v. PAOLO (2002)

The defendant mortgagor, Salvatore Di Paolo, moves for an order directing the plaintiff mortgagee (2301) to assign the mortgage to a third-party lender.   The plaintiff cross-moves for attorney's fees pursuant to a stipulation of the parties made September 30, 1999, which stipulation attempted to resolve the mortgage foreclosure proceeding.

 Since an action to foreclose a mortgage is equitable in nature (River Bank America v. Stabile, 216 A.D.2d 104, 628 N.Y.S.2d 103 [1st Dep't 1995] ) and, prior to an actual sale in foreclosure, the Court is authorized to condition any enforcement procedure (CPLR 5240;  Guardian Loan Co. v. Early, 47 N.Y.2d 515, 419 N.Y.S.2d 56, 392 N.E.2d 1240 [1979];  Wandschneider v. Bekeny, 75 Misc.2d 32, 346 N.Y.S.2d 925 [Supreme Ct. Westchester 1973] ), this Court may exercise its discretionary powers to meet the exigent circumstances where, as here, the mortgagor has been able to secure financing to redeem or satisfy the accelerated amount due.   While the plaintiff is prepared to accept the moneys to be tendered (now retained in the mortgagor's attorney's escrow account) and to assign the mortgage to the mortgagor, it refuses to assign the mortgage to the third-party lender.   Cf. Real Property Law § 275.

 There are apparently junior liens on the real property, the residence of the mortgagor.   Generally, once a mortgage is delivered to the mortgagor in apparent satisfaction of the underlying debt, the law implies a merger of interests, legal and equitable, so that the mortgage lien is extinguished unless the parties to the transaction express a different intention, which ordinarily presents factual issues for trial.  Krekeler v. Aulbach, 51 App.Div. 591, 64 N.Y.S. 908 (1st Dep't 1900), aff'd, 169 N.Y. 372, 62 N.E. 416 (1902);  Egrini v. County of Suffolk, 157 Misc.2d 988, 599 N.Y.S.2d 457 (Supreme Ct. Suffolk 1993);  Erhal Holding Corp. v. Nobile, N.Y.L.J. 7/25/94, p. 30, col. 3 (Supreme Ct. Westchester);  see Mitzner, Court Rules on Mortgage Termination, N.Y.L.J. 9/26/94, pp.   S1, S9;  78 N.Y.Jur.2d, Mortgages, §§ 314-321.   At bar, there would appear to be sufficient reasons for the mortgagor to avoid merger as junior encumbrances exist but there is no intention to defraud any person.   All the mortgagor is attempting to do is to substitute lenders in the nature of refinancing.

Prior to 1989 and 1990 when section 275 of the Real Property Law was amended, mortgagees had to assign the mortgage or execute a satisfaction piece at the request of the mortgagor.   Now the statute is permissive as to assignments, not mandatory.  Harris v. Crossland Mtge. Corp., 160 Misc.2d 520, 610 N.Y.S.2d 423 (District Ct. Nassau 1994).   However, where the party making the payment has a right to redeem (i.e., usually the owner-mortgagor) and the real property would otherwise be foreclosed upon, the courts have directed assignments of the mortgages to the payor.  River Bank America v. Stabile, supra, 216 A.D.2d 104, 628 N.Y.S.2d 103;  Goldstein v. Soledad Place, 157 Misc.2d 801, 599 N.Y.S.2d 213 (Supreme Ct. New York 1993);  but cf.  Harris v. Crossland Mtge. Corp., supra, 160 Misc.2d 520, 610 N.Y.S.2d 423 (no assignment required on mere refinancing).   Perhaps the defendant mortgagor and the third-party lender could have structured their deal so that the new lender had the equity of redemption, while the mortgagor retained title, which would then have presumably entitled the lender to an assignment of the mortgage under the foregoing authorities since there was no intention to actually pay off the mortgage or to keep a dormant mortgage alive.   78 N.Y.Jur.2d, Mortgage, §§ 393, 395;  1 Bergman on New York Mortgage Foreclosures, §§ 2.21[2], 4.07.

Circular process is not required and, in any event, the third-party lender would not want to buy into a lawsuit without receiving a premium for the risk.   At bar, under the circumstances disclosed, the Court exercises its discretion to modify the enforcement of the plaintiff's judgment (CPLR 5240) to achieve equity and justice and, therefore, grants the motion to stay the sale and permit defendant mortgagor the right to redeem the mortgage by payment of all sums due ($444,917.72) within ten (10) days hereof and upon payment of all sums due, the plaintiff shall assign the mortgage to the third-party lender and, further provided, that defendant Di Paolo pay to plaintiff's counsel within ten (10) days hereof as and for attorney's fees the sum of $9,000 inclusive of disbursements representing the amount billed on August 23, 2001 ($4,255.60) and the difference ($4,744.40) fixed by the Court for services rendered subsequent to September 24, 1999.   The cross-motion is granted to the extent indicated.

JOAN B. LEFKOWITZ, J.